Youree v. Limerick , 157 La. 39 ( 1924 )

This matter is before us for review of the judgment of the Court of Appeal for the Second Circuit affirming the judgment of the First judicial district court for the parish of Caddo.

The issue involves a plea of estoppel and the question of priority between the lessor's lien and a chattel mortgage.

The judgment of the Court of Appeal, affirming the district court, ranked the chattel mortgage above the lessor's lien. Relators (the lessors) aver that this judgment is erroneous, and that it is in conflict with the jurisprudence of the Court of Appeal for the First Circuit, as set forth in the case of Walton A. Lyons v. Clark Warehouse Improvement Company, decided December 22, 1922.

In the case at bar, the substantial facts are as follows:

Plaintiffs are the owners of the premises No. 310 Texas street, in the city of Shreveport, which they have been leasing for some years to parties operating a café therein. Their original tenant was one Vaky, and the business was known as "Vaky's Café." Upon the retirement of Vaky, the furniture and fixtures were purchased by Gregory Caporal, who became plaintiff's tenant, and continued the business.

On July 11, 1921, Caporal obtained a loan of $4,500 from Tony Papas, for which he gave his note due January 30, 1922, and secured by a chattel mortgage on all the furniture and fixtures in the leased premises. This instrument was properly recorded.

On April 15, 1922, W.L. Limerick and H.C. Leopard bought the business, including the furniture and fixtures, from Caporal, and assumed the obligations of the chattel mortgage and of the lease. Subsequently, Leopard transferred his interest to Limerick, who became plaintiffs' sole tenant under the aforesaid lease.

Limerick having defaulted in the payment of his rent, plaintiffs, in December, 1922, brought suit against their tenant for $1,200, with interest and attorney's fees and for recognition of their lessors' lien and privilege on all the furniture, fixtures, and contents of the leased premises. The property seized was sold pendente lite for $1,800.

The court below awarded plaintiffs judgment for the amount claimed, with recognition of their lessors' lien and privilege and the enforcement thereof, but subordinated the same to the claim of Tony Papas, who, by way of intervention and third opposition, had asserted his right to the balance due, $1,500, on the note of $4,500 given him by Caporal, as secured by the aforesaid chattel mortgage on the said furniture and fixtures, claiming the said chattel mortgage primed the lessors' lien of plaintiffs.

The said judgment, on appeal by plaintiffs, was, as heretofore set forth, affirmed by the Court of Appeal.

The pertinent provision of the Chattel Mortgage Law (Act No. 198 of 1918) is section 4, which reads:

"* * * That every mortgage shall be a lien on the property mortgaged from the time same is filed for recordation, which filing shall be notice to all parties of the existence of such mortgage, and saidlien shall be superior in rank to any privilege or lienarising subsequently thereto." (Writer's italics.)

The Court of Appeal in subordinating the plaintiffs' claim to that of the third opponent, interpreted this provision of the statute as intending to give a prior recorded chattel mortgage superiority in rank over a lessor's lien arising subsequently thereto. Its appreciation of the law is correct, but its application thereof to the present issue is incorrect. The statute, in express terms, provides that the chattel mortgage lien "shall be superior in rank to any privilege or lien arising subsequently thereto." No qualification nor exception is admitted. Clearly, then, the words "any privilege or lien" include the lessor's lien and privilege.

In the case of Lyons v. Clark Warehouse Improvement Co., referred to, supra, the Court of Appeal for the First Circuit, in construing the quoted provision of the statute, held that it applied only to ordinary liens and privileges and not to the lessor's security for his rent, which is of a higher nature than a mere privilege carrying with it the right of pledge and retention.

The answer to this argument is to be found in the recognition of the fact that the right of retention is merely an ancillary and remedial right. The law confers it upon the lessor for the purpose of adding to his security and of facilitating the enforcement of his privilege. The existence of the auxiliary right of detainer may make the privilege more effective, but it, nevertheless, retains its character of a privilege without advancing in rank. The lessor, notwithstanding his right of pledge and detainer, cannot prevent the seizure and sale of the pledged property at the instance of other creditors. Auge v. Variol, 31 La. Ann. 865; Horner v. Sheriff, 34 La. Ann. 389; Kirkpatrick Co. v. Oldham, 38 La. Ann. 553.

This distinction was recognized and applied by the Court of Appeal for the Parish of Orleans in the case of Roses v. Siggio, No. 7904 of its docket, decided May 17, 1920. The issue involved there was whether the lien and privilege of a workman and repairman, with the right to detain the article on which he had worked, took precedence over a chattel mortgage executed prior thereto. The court held that it did not. The organ of the court was Judge St. Paul (now one of the Associate Justices of this court). The following from the opinion is apposite to the question now before us, viz:

"Now it is clear that the right to retain a thing until a debt be paid must and does necessarily confer the highest possible privilege or lien upon the thing, but the acceptance of the right is in the security thus secured to the creditor, and not in the mere vain detention of the thing itself. Hence, our courts have not hesitated to compel him whose privilege was based on a right of pledge to take the substance of his right and waive the name. Chattel mortgages duly recorded prime all liens and privileges subsequently arising, even though coupled with a right of pledge and actual possession."

The manifest purpose of the law is to permit persons owning only personal property, to borrow money on the security of such property. In many cases, the sole recourse of the mortgaged creditor is against the mortgaged chattels, hence the necessity of ranking the chattel mortgage lien above any privilege arising subsequently thereto. If this were not so, and the statute should be so construed as to rank the privilege created by the chattel mortgage law below those privileges which are accompanied by the additional right of retention and pledge, the object of the law would, in a great measure, be destroyed. We cannot accede to any such construction, but must interpret the law so as to make it as effective as the Legislature intended it to be when they enacted it.

We are therefore of the opinion that the privilege resulting from the execution and recordation of a chattel mortgage takes precedence over and primes a lessor's lien arising subsequently thereto. And, of course, the converse is also true, that a prior lessor's lien is superior to a subsequent chattel mortgage.

While, as we have stated, the interpretation placed upon the statute by the Court of Appeal for the Second Circuit is correct, its application of the law to the present issue is incorrect.

We quote from the opinion:

"Third opponent's chattel mortgage was filed and recorded on July 13, 1921. The property covered by the mortgage was then in plaintiffs' building, and owned by Caporal, the lessee of plaintiffs. All of Caporal's rent was paid on April 15, 1922, when Limerick and Leopard took over the café. The latter parties, lessees, paid the rent to plaintiffs to October 1, 1922, when they defaulted. The lien or privilege of the lessors on the property found in the café, so far as this suit is concerned, arose first, on the 1st day of October, 1922. As each month's rent was paid, the lessors' lien was thereby canceled pro tanto on all the property in the building. When there was not rent due, there could be no lien and privilege. The lien or privilege is only necessary to the main obligation to pay the rent, and, necessarily, when the primary obligation was paid, that extinguished the secondary or accessory obligation, to wit, the lien."

The fundamental error in this reasoning is to be found in the court's appreciation of the time at which the lessors' lien attached. The opinion holds that this lien arose only when the rent became due. The court says, no rent due, no lien and privilege. That, as each month's rent was paid, the lien became thereby canceled pro tanto, on all the property in the leased premises.

We are unable to subscribe to this view of the law. There is no more reason for holding that the lessor's lien only attaches when default occurs in the payment of the rent than there is for holding that the chattel mortgagee's lien only attaches when the mortgage debt becomes due.

As each month's rent was paid by the lessee, the debt, the primary obligation, was canceled pro tanto, and not the lien, which, as the court itself admits, was only the "secondary or accessory obligation." The lien still remained on all the property to secure the payment of the rent to become due under the lease contract.

The lessor's lien is purely statutory. See Revised Civil Code, arts. 2705, 2707, and 3218. It is the uniform rule that the lessor's statutory lien attaches to chattels as soon as they are brought on the leased premises, and that said lien is in no wise dependent upon the maturity of the rent. 24 Cyc. p. 1250 (v), and authorities there cited.

"The statutory lien of a landlord for rent attaches at the beginning of the tenancy, or when the chattels are brought upon the premises. * * * Such lien does not depend upon a levy, and exists independently of the institution of any proceeding for its enforcement. The remedy by levy, distress or attachment, when available, is simply to enforce a lien already existing." 16 R.C.L. § 503, p. 988, and authorities cited.

The record establishes, and the foregoing excerpt from the opinion of the Court of Appeal shows, that the property covered by the chattel mortgage was in the leased premises at the time of the execution of said mortgage. The lessors' lien and privilege therefore had attached and was in existence when the chattel mortgage was given to the intervener and third opponent. In this situation plaintiffs' claim outranked that of the intervener and third opponent. Section 4, Act 198, 1918; 16 R.C.L. section 504, p. 988. The district court and the Court of Appeal were therefore in error in not so deciding.

Since we have concluded that judgment must go for plaintiffs, it becomes unnecesessary for us to pass upon their plea of estoppel.

For the reasons assigned, it is therefore ordered, adjudged, and decreed that the judgment of the Court of Appeal herein made the subject of review, and also the judgment of the district court which was affirmed by said judgment of the Court of Appeal, be set aside in so far as said judgment recognized the lien and privilege of Tony Papas, third opponent, as holder of the chattel mortgage, as superior to the lessors' lien and privilege of plaintiffs, and ordered the payment to said third opponent by preference and priority out of the proceeds of the property seized and sold herein; and it is now ordered, that the said judgments of the district court and of the Court of Appeal be, and they are hereby, amended so as to decree that the plaintiffs' lessors' lien and privilege upon the property and effects provisionally seized is superior to and outranks the lien and privilege of Tony Papas, third opponent, as chattel mortgage holder, and, accordingly, T.R. Hughes, sheriff of the parish of Caddo, is hereby ordered to pay over to Mrs. Bettie Scott Youree, E.H. Randolph, Mrs. Susie Rose Lloyd, Mrs. Paul G. Whaley, Mrs. Hal Moody, Mrs. F.H. Seufert, and W.A. Steadmen, plaintiffs, from the proceeds of the sale of the property seized herein the sum of $1,200, with 5 per cent. per annum interest thereon from judicial demand until paid, together with 10 per cent. attorney's fees and all costs of this suit, and the balance, if any, to be paid over to said third opponent on his chattel mortgage claim. It is further ordered that, as thus amended, said judgments be affirmed. The costs of all the courts in the proceedings arising from the intervention and third opposition of Tony Papas to be paid by said intervener and third opponent.

On Rehearing. By the WHOLE COURT.